Yes, you can break a commercial lease in Ontario, but it is not simple. Unlike residential tenancies, there is no automatic right to give notice and walk away. Commercial tenants have five legitimate paths: an early termination clause, a mutual surrender agreement, assignment or subletting, a claim of landlord breach, or a legal doctrine like force majeure or frustration of contract. Each option carries different costs, timelines, and risks.
This post walks through each option, the process for using it, and what happens if you leave without legal grounds.
Why Breaking a Commercial Lease in Ontario Is Different
Commercial leases are treated as binding contracts, not regulated housing agreements. The Residential Tenancies Act does not apply. Instead, commercial tenancies in Ontario are governed by the Commercial Tenancies Act, RSO 1990, c. L.7 (the CTA), and often more importantly, by the specific terms of the lease itself.
The CTA sets out baseline rules around assignment, subletting, landlord remedies, and notice. But most commercial leases are heavily negotiated documents that can expand, restrict, or override those defaults. This means your rights and obligations depend first and foremost on what your lease actually says.
The stakes of getting this wrong are high. A tenant who abandons a commercial lease without legal grounds can be held liable for the full remaining rent, every month, until the lease expires or the landlord finds a new tenant. A five-year lease with three years remaining could mean three years of rent still owed. Security deposits are typically forfeited. And landlords in Ontario have powerful tools to enforce their rights, including changing locks and seizing property.
Before taking any step, read your lease and speak with a commercial lease lawyer.
Your Options for Breaking a Commercial Lease in Ontario
The following five options are the recognized legal pathways for commercial lease early termination in Ontario. Some require your landlord's cooperation; others depend on the specific facts of your situation. Start with Step 1 and work through the list.
Step 1: Review Your Lease for an Early Termination Clause
The first thing to do when breaking a commercial lease in Ontario is read your lease carefully, all of it.
Many commercial leases contain an early termination clause (sometimes called a break option or demolition clause). This is a negotiated provision that allows either party, or specifically the tenant, to exit the lease before the end of the term, usually with:
- Written notice given a set number of months in advance (commonly 3 to 6 months)
- A termination fee (often equal to several months' rent)
- Specific conditions that must be met (e.g., no default on rent, certain years into the term)
If your lease has one of these clauses and you meet the conditions, this is your cleanest exit. Follow the process exactly as written, improper notice or a missed condition can invalidate the clause.
Also look for:
- Demolition clauses, Allow the landlord (or sometimes the tenant) to terminate if the building is being redeveloped
- Relocation clauses, Give the landlord the right to move you within the building or terminate
- Options to terminate on certain triggers (e.g., a co-tenant leaves, or sales fall below a threshold in retail contexts)
If none of these clauses exist, move to the next option.
Step 2: Negotiate a Mutual Agreement (Lease Surrender)
If your lease does not have an early termination clause, negotiating directly with your landlord is often the most practical path forward.
A lease surrender is a mutual agreement between you and your landlord to end the lease before its expiry. Both parties sign a deed of surrender that releases each side from their obligations going forward. The terms are fully negotiable, and may include:
- A surrender date (when you vacate)
- A surrender payment from you to the landlord (compensation for lost future rent)
- Security deposit treatment (returned, partially returned, or retained)
- Restoration obligations (whether you must return the premises to original condition)
Why would a landlord agree? More often than you might expect. If the commercial real estate market is strong and the landlord believes they can re-lease the space at a higher rate, they may welcome the exit. If you are a struggling tenant who is paying unreliably, a clean surrender may be preferable to a prolonged default process.
The key is to approach this conversation before you default, while you still have something to offer. Once you stop paying rent, your negotiating position weakens considerably.
Have a lawyer review any surrender agreement before you sign. The documentation needs to properly release you from the lease, poorly drafted surrenders can leave ambiguity about ongoing obligations.
Step 3: Assignment or Subletting
If your landlord will not negotiate a surrender, finding someone to take over your lease is another legitimate Ontario commercial lease exit option.
Assignment means transferring the entire lease to a new tenant. You step out, they step in, and they become bound to the landlord for the remaining term. In most cases, you are released from further liability once a valid assignment is completed, though some leases retain the original tenant's liability as guarantor.
Subletting means you find someone to occupy the space under a separate agreement with you, while you remain on the hook to the landlord. You continue paying rent; your sub-tenant pays you. This is less clean than an assignment because you remain liable throughout.
The consent rule is critical here. Most commercial leases include a covenant requiring the landlord's consent before any assignment or subletting. However, under section 23(1) of the Commercial Tenancies Act, where a lease contains such a restriction, the landlord's consent cannot be unreasonably withheld, unless the lease expressly states otherwise. If a landlord refuses consent without a legitimate reason, a tenant can apply to the Superior Court of Justice for an order permitting the assignment or subletting.
Legitimate reasons a landlord can refuse:
- The proposed new tenant lacks the financial capacity to meet lease obligations
- The proposed use conflicts with the permitted use in the lease
- The proposed tenant is a competitor of another building tenant
Illegitimate reasons (potentially unreasonable):
- Blanket refusal with no stated reason
- Demanding a higher rent from the incoming tenant as a condition
- Using consent as leverage to force a lease renegotiation
The process for assignment: identify a qualified replacement tenant, submit a written request to your landlord with the proposed assignee's credentials, await a written response within a reasonable time, and execute a formal assignment agreement if approved.
Step 4: Claim Landlord Breach of the Lease
If your landlord has materially failed to meet their obligations under the lease, you may have legal grounds to treat the lease as terminated.
Common landlord breaches in commercial leases include:
- Failure to maintain the building structure or common areas in agreed condition
- Failure to provide services promised in the lease (heat, HVAC, security, utilities)
- Interference with quiet enjoyment (other tenants allowed to disrupt your business, landlord entering without proper notice)
- Failure to complete agreed tenant improvements
- Misrepresentation at the time of signing about the condition or use of the property
This option requires careful documentation and legal advice before you act. The consequences of getting it wrong are serious: if you vacate or stop paying rent claiming landlord breach, and a court later determines the breach was not material or was not properly established, you become the party in breach. This could expose you to the full liability described in the consequences section below.
If you believe your landlord is in breach:
- Document everything in writing, photograph conditions, send emails, keep records of all communications
- Send a formal written notice of breach to your landlord, specifying the obligation they have failed to meet and giving a reasonable time to remedy it
- Do not abandon the premises or stop paying rent until you have legal advice
- If the breach is not remedied, consult a lawyer about your options, which may include withholding rent, seeking a court-ordered remedy, or, in serious cases, treating the lease as repudiated
Step 5: Force Majeure or Frustration of Contract
In limited circumstances, external events beyond either party's control may provide a basis for terminating a commercial lease in Ontario.
Force majeure applies only if your lease contains a specific force majeure clause. These clauses list events, natural disasters, pandemics, war, government orders, that excuse one or both parties from performance. The scope, triggering conditions, and remedies vary widely. Some clauses suspend obligations temporarily; others allow termination. If your lease has such a clause, its exact wording controls.
Frustration of contract is a common law doctrine that applies when an unforeseen event, not caused by either party, makes the fundamental purpose of the contract impossible to achieve. In Ontario, the Frustrated Contracts Act, RSO 1990, c. F.34 governs what happens when a contract is found to be frustrated.
The bar for frustration is very high. Courts do not lightly find that a commercial lease is frustrated. Increased costs, reduced business viability, and temporary closures do not generally meet the standard. During the COVID-19 pandemic, most Ontario courts declined to find commercial leases frustrated by pandemic restrictions alone.
Situations where frustration may succeed:
- Total physical destruction of the leased premises
- A government order permanently and specifically prohibiting the use of the premises for the permitted purpose (not merely restricting hours or capacity)
- Expropriation of the property
Do not assume frustration applies to your situation without legal advice. This option requires a legal analysis of the specific facts and the specific language of your lease.
What Happens If You Break a Commercial Lease Without Legal Grounds
Understanding the consequences is essential before deciding how to proceed with breaking a commercial lease in Ontario without a proper legal basis.
Liability for remaining rent: If you abandon the lease without valid grounds, you remain liable for rent for the remainder of the term. The landlord may sue you for this amount. There is an important nuance here: under the longstanding rule from Highway Properties Ltd v Kelly, Douglas and Co. Ltd, 1971 CanLII 123 (SCC), a commercial landlord who refuses to accept a tenant's repudiation of the lease can keep the lease alive and continue claiming rent without any obligation to find a new tenant. However, this rule is currently before the Supreme Court of Canada, the SCC granted leave to appeal in Aphria Inc. v. Canada Life Assurance Company in June 2025 and heard the case on February 18, 2026. A decision may change this landscape. A commercial tenant should not rely on the landlord being required to mitigate without current legal advice.
Security deposit forfeiture: In most cases, a landlord will retain the security deposit to apply against losses.
Landlord remedies under the CTA:
- Lock changes: If rent is 16 or more days overdue, a landlord may change the locks and evict the tenant (with an obligation to allow reasonable access to remove property)
- Distress: The landlord may seize and sell personal property within the leased premises to satisfy unpaid rent, after giving notice and holding property for five days
- Court action: The landlord may sue for arrears and damages in Small Claims Court (for amounts under $50,000) or the Superior Court of Justice
Holdover penalty: If a fixed-term tenant stays in the premises after the landlord has asked them to leave, the CTA provides for a penalty of two months' rent for every month the tenant remains, plus applicable costs.
Credit and business impact: Unresolved lease obligations can affect your credit and your ability to secure future commercial space.
Practical Steps Before You Act
Regardless of which option applies to your situation, take these steps before doing anything:
- Read your lease, All of it. Look specifically for early termination clauses, assignment provisions, force majeure language, and notice requirements
- Get legal advice first, Commercial lease law is complex and fact-specific. A lawyer can tell you which options are available given your specific lease and circumstances
- Do not simply abandon the premises, Walking away without following a legal process creates the maximum financial exposure
- Keep paying rent while you negotiate, Stopping rent payments triggers the landlord's enforcement rights and weakens your negotiating position
- Document everything, If you are relying on landlord breach, document conditions and communications carefully from the beginning
- Negotiate in writing, Any agreement with your landlord should be in writing and reviewed by a lawyer before you sign
Frequently Asked Questions About Breaking a Commercial Lease in Ontario
Can a commercial tenant break a lease in Ontario?
Yes. A commercial tenant in Ontario can legally exit a lease early through a termination clause in the lease, a mutual surrender agreed with the landlord, assignment or subletting to a replacement tenant, a claim of material landlord breach, or frustration of contract. However, there is no automatic right to terminate and each option has specific requirements. Legal advice is recommended before acting.
What are the penalties for breaking a commercial lease in Ontario?
If a commercial tenant breaks a lease without legal grounds, they may be liable for all remaining rent under the lease, forfeit their security deposit, face distress (seizure of their property), and be subject to court action. If they remain in the premises after being asked to leave, the Commercial Tenancies Act provides for a penalty of two months' rent per month plus costs.
Can a landlord refuse to let a commercial tenant assign their lease in Ontario?
A landlord can refuse, but under section 23(1) of the Commercial Tenancies Act, that refusal cannot be unreasonable, unless the lease expressly permits blanket refusal. If a landlord refuses without valid grounds, a tenant may apply to the Superior Court of Justice for an order permitting the assignment. Valid grounds for refusal include the proposed tenant's lack of financial capacity or use conflicts.
What is the difference between subletting and assigning a commercial lease in Ontario?
An assignment transfers the entire lease to a new tenant, who then deals directly with the landlord. The original tenant is typically released (unless the assignment agreement specifies otherwise). A sublet creates a new tenancy agreement between you and a sub-tenant, you remain bound to the landlord for the full rent and obligations. Assignment is generally preferable for a tenant who wants a clean exit.
Does a commercial landlord in Ontario have to find a new tenant after a tenant leaves?
Under the general rule, when a landlord accepts a tenant's repudiation of the lease, they must make reasonable efforts to re-let the space and mitigate their losses. However, under the Highway Properties doctrine (1971 CanLII 123, SCC, currently under SCC review in Aphria, heard February 18, 2026), a landlord who refuses to accept the repudiation and keeps the lease alive may not be required to mitigate. Because the law in this area is unsettled pending a Supreme Court of Canada decision, a tenant should get current legal advice before assuming the landlord will be required to find a replacement.
What happens if I just stop paying rent on my commercial lease in Ontario?
If you stop paying rent without vacating the premises, your landlord can change the locks once rent is 16 or more days overdue and seek to evict you. They can also exercise distress, seizing and selling personal property in the premises to recover unpaid rent. If you vacate but stop paying, the landlord may sue you for all remaining rent. Unilaterally stopping rent payments is high-risk without legal grounds.
How much notice does a commercial tenant need to give to end a lease in Ontario?
For a month-to-month commercial tenancy, at least one month's written notice is required, with the lease ending on the last day of the tenancy month. For a fixed-term lease, the lease ends on the date specified and no notice is required for normal expiry, but early termination requires either a contractual right or a legal basis. Notice requirements for assignment or surrender depend on what your lease says.
Can I break my commercial lease if my landlord isn't maintaining the property?
Possibly. If the landlord has materially breached a maintenance obligation in the lease and refused to remedy it after written notice, a tenant may have grounds to treat the lease as terminated. This is a fact-specific analysis and carries significant risk, if a court disagrees that the breach was material, the tenant becomes the one in breach. Document all issues in writing, give formal written notice, and get legal advice before vacating.
Sources & Official Resources
Ontario Statutes Cited
- Commercial Tenancies Act, RSO 1990, c. L.7, Governing statute for commercial tenancies in Ontario, including assignment consent rules (s. 23), landlord remedies, distress, and holdover penalties
- Frustrated Contracts Act, RSO 1990, c. F.34, Governs what happens when a contract is found to be frustrated under Ontario law
Federal Case Law
- Highway Properties Ltd v Kelly, Douglas and Co. Ltd, 1971 CanLII 123 (SCC), Supreme Court of Canada decision establishing four landlord options on tenant repudiation, including keeping the lease alive without mitigation; currently under SCC review
Helpful Government Resources
- Renting Commercial Property in Ontario, Ontario Government, Official government overview of commercial tenancy rules, remedies, lock-change procedure, distress, and holdover penalties
- Commercial Tenancies Act, CanLII, Full current text of the Commercial Tenancies Act
Contact Hadri Law
Breaking a commercial lease in Ontario is one of the most consequential decisions a business owner can face. The legal options available to you depend on your specific lease, your landlord's cooperation, and the facts of your situation.
Nassira El Hadri and the team at Hadri Law advise Ontario businesses on commercial lease disputes, surrender negotiations, assignment, and all aspects of commercial leasing law. We serve clients in English, French, Spanish, and Catalan.
Call us at (437) 974-2374 for a free consultation. We will help you understand your options and take the right steps to protect your business.
This post is for general information only and does not constitute legal advice. Commercial lease law is fact-specific. Consult a lawyer about your particular situation.
